the business cycle Flashcards
what is the business cycle ?
the periods of expansion and contraction relative to the trend rate of economic growth
what are the parts of a business cycle
- expansion
- contraction
- peak
- recession
- trough
with regards to the business cycle, what is expansion ?
when the real GDP is increasing
with regards to the business cycle, what is contraction?
GDP growth declining
with regards to the business cycle, what is the peak?
the point at which GDP starts to fall
with regards to the business cycle, what is recession ?
negative economic growth
with regards to the business cycle, what is the trough?
the point at the end of a recession in which economic growth begins to expand
what signifies the end of the expansion phase?
The end of expansion is typically associated with rising interest rates and rising wages and profits begin to fall
what signifies the beginning of economic contraction?
A contraction often begins with decreased spending by firms on capital goods, and/or decreased spending by households on new houses and consumer durables
what effects do contractions and recession have on the unemployment rate
Contraction and recessions increase the unemployment rate
During the expansion phase of the business cycle:
production increases.
A period of expansion in the business cycle ends when:
the business cycle reaches its peak.
During the contraction phase of the business cycle:
unemployment increases
A ‘technical recession’ is defined as:
six months (2 quarters) of negative economic growth.
